Toyota Dealers' $3 Billion Bet
It's been difficult, almost impossible to pick-up any auto industry consumer or trade publication the past few weeks without reading the latest tantalizing factoids about Toyota's new full-size pickup – the Tundra.
This has been a very well kept, semi-secret, but at the Detroit Show last week all the truck's details were revealed and on display for the first time. All, except, the dealer program and marketing plans.
During the show I had the opportunity to meet with Jim Farley, recently promoted to group vice president of Toyota marketing. Farley was responsible for directing, supervising and leading the multi-million dollar Tundra launch program. He gained this important position after successfully launching Toyota's Scion brand in the U.S.
Farley has brought an innovative, unique approach to Toyota Marketing, developed in part from his marketing model for Scion – a shift in the auto marketing paradigm if there ever was one – and a varied background in several capacities with both Toyota and Lexus divisions.
Jim is a candid, bright, forward-thinking marketing executive, whom you'll soon learn knows both sides of the automotive marketing desk – manufacturer and dealer. And that is a rare attribute.
MB: For the purpose of our discussion, I'd like to focus on the dealer side of the massive marketing launch of the new Tundra, does that work for you?
JF: That's actually one of my favorite Tundra launch topics.
MB: What can you tell me about the program for dealers?
JF: It's huge! About five years ago when we started to get serious about preparing for the launch of Tundra, we knew it would be the straw that broke the camel's back, in terms of facility design review.
MB: How is that?
JF: What I mean by that is the timeframe. A few years ago, you may remember Volkswagen and Nissan were redoing all their looks. We had looked at all our dealerships and said, "We really need to go to a whole other level" to get into the ‘90's and the next millennium in terms of our dealer footprint." And at the same time, we knew the Tundra was coming and change was important. To add this new volume we'd have a very different customer than before and new or improved facilities were necessary for our dealers.
MB: What's been done to your dealers' stores and service areas?
JF: Fast forward to today. Half of our 1,200 dealers have invested $3 billion in redoing their facilities for Tundra! $3 billion! And the other half has been busy preparing for the operational side of the dealership.
MB: How did you go about this important change?
JF: We took a competitor's heavy duty truck to every dealer in the country about a year-and-a-half ago with an assessment. We gave them each a grade – not to grade them – but to help them through the important process of change.
MB: Was there a major area in need of help?
JF: We found dealers' service departments were a huge, glaring issue for full-size pickup business. For instance, the turning circle in the service department was 3, 4 or 5 turns; the lifts were not high enough capacity or wide enough; service bay doors had to be opened to lift the truck up to do any work on it; and, other issues existed.
MB: That could have been a major issue, couldn't it?
JF: It was a rude awakening for us! We've had to plan for every one of the 600 dealers to work on their dealerships. In addition, some of the rural dealers, especially in Texas, needed rural representation. Some dealers had far flung customers who had to drive up to 100 miles to get service.
MB: How has this issue been resolved?
JF: We are experimenting now. We just put in our first rural opportunity dealer experiment with Paul Atkinson, a dealer principal in Madisonville, Texas. His new satellite is 50 miles from the main dealership and over 100 miles away from another Toyota dealer.
He can order new trucks and deliver new trucks from this site, but it is primarily a service operation and used car outlet to fill the needs of customers who would otherwise have to travel a long distance.
MB: I've never heard of an undertaking so huge for a new vehicle.
JF: We are most proud of the $3 billion investment from our dealers. It is an incredible commitment to and for us. For us at Toyota, if our partners win, we win. And we've always had that philosophy. I'm thinking about those 1,200 dealers who have invested almost everything they've got – a huge part of their retained earnings. Their families, the dealership's employees and their families are all counting on this truck being launched the right way. So, between them and the factory associates, we've got to get this right!
MB: Is it right?
JF: Yes, it is. It has to be. And as a result our dealers will play the most critical part in the launch of this truck. How? Because we've inverted the marketing plans.
MB: Inverted the marketing plans – which means what, Jim?
JF: Most of the marketing that is important is going to be at their level, the dealer level. Every one of our dealers is doing grassroots marketing for the new Tundra truck. Every dealer has appointed a Tundra champion.
MB: A champion? What is a champion and what are their responsibilities?
JF: The champion sets up their dealership's local marketing plan, which the regions look over. Then, we help co-fund their planned activities. This includes important local events like a chili cook-off or local country western talent show or an introductory event inside the dealership.
MB: You and I have often discussed the importance of the dealer's sales floor. This is where the sale is made – in the last three feet – advertising brings them into the showroom, but the sale is made at the vehicle.
JF: You're right, especially in this segment. A lot of the people that are going to fall in love with this truck are not convinced about it. We are counting on them being a little skeptical – "I don't know … I'm not sure … I've got to touch and feel." So, when they come into that dealership – at best, kind of interested; somewhat convinced; worst case, highly skeptical, but want to maybe cross it off their list – we're going to be ready with a whole new point-of-sale material package we've never had before, that is hands-on with the truck's components.
MB: At the recent long lead launch in Charlotte, Ernie Bastien described how parts and components will be used in the sales presentations and I've seen your new Tundra teaser commercials which show key component parts comparisons with competitive truck parts – something like that?
JF: That's correct. We have special kits in all 1,200 dealerships; not just interactive, but more importantly, they are a hands-on tool box with drawers. Open up the first drawer, it's all engine; the second, all brakes; the third, all rear end. It literally explains the whole new Tundra as you go through the tool box. It's a really big deal for us, and frankly, the part of the launch I'm most proud of!
MB: How many people went through specialized training?
JF: The last time we did dealership training we had 15,000 people for the Camry, and that was our biggest launch ever because we put everyone through it from the receptionist to service writers and technicians. For Tundra, we are going to train close to 30,000 people – more than double our Camry program. And it's definitely the biggest training program the industry has ever seen.
MB: That had to be a costly line item in the budget, right?
JF: We spent close to $20 million in training. The first thing we did was bring the truck champions I mentioned earlier from the dealers to the factory – not just product knowledge training and how we manufacture it, although we obviously did that, but spent two full days on how to develop a business plan.
MB: What topics were covered?
JF: Everything possible on how to develop a grassroots marketing plan. This included specifics on how to sell the independent businesses – landscapers, contractors, the delivery people and other local business. They were also advised on how to line-up local accessory manufacturers and suppliers who can supply everything from snow plows to racks to camper tops for new Tundra owners. It was a total grassroots approach.
MB: When did in-dealer training begin?
JF: About three months ago when trucks became available we started training everyone in the dealership – everyone – almost 30,000 people. We had 150 trucks hand-built just for this training. And we're about to finish the training program as we speak.
MB: Your training program is staggering in scope, why so big?
JF: We know the competition is going to be fierce – all we can control is our product, how well prepared we are, how we present it and how prepared our dealers are to present it well. Our competitors have always executed their products well, but they've also put a lot of investment in training for the pickup truck business and it has helped them through all these years.
MB: Think you've done the job?
JF: I believe we've definitely done our homework and done it better.
MB: Given the brand penetration of Ford's F150 and Chevy's Silverado, where do you think your sales will come from? Conquest or more likely from current Toyota owners?
JF: Actually, a lot of people, even in Toyota, are surprised by the statistics from our research. There are a couple hundred thousand people who are Toyota people, who buy a full-size truck every year, but many of them did not buy a Toyota truck in the past because they were looking for something with heavier-duty capability. A lot of them are Camry people with another vehicle in the driveway – a Highlander or a Sienna person – and we think that's a big opportunity for us and are prepared for it.
MB: I know the ad presentation is in a couple weeks, but can you give our readers a glimpse under the door?
JF: Our approach to launching Tundra is very different, as you'll hear very soon, because it's very big in size, scope and the way we're doing it is completely different than what we've done in the past.
MB: Can you cite a couple examples?
JF: For example, we went to the dealer ad groups and said we want to do this together.
MB: That was a shock to them, wasn't it?
JF: They were like, "Well, that's going be great for our business." Additionally, we incentivized them (the dealers) to participate in the Tundra launch. More than half of our media weight will come from their efforts.
MB: That's not just rare, it's very surprisingly unique.
JF: I think only Toyota could pull this off because our relationship with our dealer associations is really unusual. We trust each other.
MB: How did it work?
JF: Basically, we gave them an advertising menu and said, "We're going to do these for you and you don't even have to pay for the production costs of the ads, but you pick what you want from our menu of advertising." Then, Toyota went out to film whatever they wanted from running footage in the snow to open fields to the factory. Then, we gave them brand ad standards – like yellow background because Tundra is industrial – and we built ads for every group. Our teaser ads you mentioned earlier are also being run by Toyota Advertising Groups. We both realize the opportunity.
MB: I really liked the teaser ads – simple, direct and product focused.
JF: We listened to the customer. They said, "You're new. Tell us what's new, better and different and then prove it to me." OK, so we're proving it to people. Wait until you see the rest of the program.
MB: The Tundra has been a massive, maybe gigantic undertaking for Toyota, what is your ultimate goal as a marketer and major corporate executive?
JF: I … we at Toyota want to make certain our dealers are very successful in this new product. That's the magic moment of the launch of Tundra.
If Toyota's dealers are as energized, enthusiastic and ebullient as Jim Farley is about Tundra's launch program, I predict they will not just reach their lofty sales goal, but exceed it.